Two Opportunities to Transform Treasury Amid COVID-19
Highlights from the 2020-2021 Journeys to Treasury Report
Treasury Centralization:
Now is the Time
Treasury centralization has been a trend for more than a decade, particularly among multinational corporations. Today, a wide spectrum of companies sees it as a priority.
Centralization can:
Increase liquidity.
Enhance visibility and management of cash.
Reduce risk on a group-wide basis.
Create economies of scale.
Optimize operational efficiency and controls.
Current business and economic conditions create a compelling case for starting the centralization process sooner rather than later.
COVID-19: Changing the Role of Treasury
The COVID-19 crisis has elevated treasury's strategic role in the enterprise. Treasury is in a strong position to advance projects that improve liquidity and risk management, and support other business goals.
"Smart treasurers are convincing their boards these projects are not only self-funding, but essential to develop the resilience and intelligent control needed to help the company better survive a crisis."
— Damien McMahon, Partner, PwC
Benefits of Treasury Centralization
Having adapted to the initial shocks of this pandemic, now is the time to focus on treasury centralization and realize its benefits:
Optimized liquidity
Better risk management
Reduced costs
Enhanced business intelligence
Capacity for Growth
Optimizing Centralization
Successful centralization requires simplifying a range of interconnected activities, including banking, technology, and account structures. With this in mind, three tactics have emerged to maximize success.
Multiple systems and fragmented data, often due to M&A or legacy systems.
01
Phase projects
02
Focus on these three tangible goals
03
Stress test new models
Phase projects
Move forward in smaller steps, and ensure longer-term project objectives and deliverables align with evolving requirements.
Focus on these Three Tangible Goals
Improve visibility of information and access to data across banks and internal counter-parties.
Enhance cash mobility across countries, currencies, and entities.
Strengthen security with better controls around bank account management, segregated approvals, and multi-factor authentication.
Stress test new models
Analyze multiple scenarios to prepare for the unexpected.
"You need to be agile and prepare for external factors you can neither predict nor control. New processes, controls, and operational models should identify 'what if' scenarios and test organizational readiness."
— Walid Shuman, Managing Director, Head of Cash Management Americas, BNP Paribas
Read more about these insights in the complete 2020-2021 Journeys to Treasury report.
Disclosure +
THE CONTENT IS BASED ON ARTICLES FROM JOURNEYS TO TREASURY, A UNIQUE COLLABORATION BETWEEN BNP PARIBAS, PRICEWATERHOUSECOOPERS (PWC), SAP, AND THE EUROPEAN ASSOCIATION OF CORPORATE TREASURERS (EACT).
Enhanced business intelligence
Improve data analytics with centralized data.
Better risk management
Create a central view of the organization's financial and operational risk.
Align hedging strategies with the organization's risk appetite.
Reduce the risk of fraud and cybercrime through standardized controls and access.
Optimized liquidity
Create a central view of cash across the business.
Mobilize liquidity at a group level.
Resolve working capital friction points with sales and procurement teams.
Leverage working capital assets as a source of liquidity.
Reduced costs
Eliminate duplication of systems, processes, and roles.
Consolidate banking relationships, particularly when combined with payment and collection systems.
Capacity for Growth
Support additional scale, new markets, or innovative business models quickly.
Treasury on Demand
01
02
Regulatory differences and disparate local requirements across countries and regions.
03
The iterative nature of centralization due to M&A, geographic reach, and changes in business structure and organization.
Treasury Centralization
Treasury Centralization
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bEST pRACTICES
Challenges
Challenges
Challenges
bEST pRACTICES
01
Multiple systems and fragmented data, often due to M&A or legacy systems.
02
Regulatory differences and disparate local requirements across countries and regions.
03
The iterative nature of centralization due to M&A, geographic reach, and changes in business structure and organization.
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Key drivers for enabling treasury on demand
These three strategies can help deliver treasury on demand:
"We have seen an acceleration in treasurers' digital agenda as a result of the crisis. For example, while digital signatures were previously on treasurers' 'to do' list, they have implemented these very quickly to meet changing business demands."
— Didier Vandenhaute, Partner, PwC
The COVID-19 crisis has accelerated and strengthened the business case for:
Treasury On Demand:
When Speed Is the Answer
How fast is fast enough? How quickly do treasurers need to produce data, process transactions and centralize liquidity?
One point is clear: Monthly, weekly, or even daily data is not fast enough when decisions have to be made in real-time. Informed decisions need treasury on demand.
Automated processes.
Digitized payment and collections processes.
Faster access to data for operational and strategic decision making.
Leverage API's
Prioritize digital initiatives
What data they want to exchange with their banks and commercial partners.
How often they want to exchange data.
What happens next with shared data.
Unlike existing connectivity methods, where banks determine data exchange parameters, application programming interfaces (APIs) allow corporate finance managers to define:
“Although the implementation of APIs is far quicker and simpler than, for example, host-to-host connectivity, there are still some issues to overcome, particularly for those operating cross-border, due to the lack of standardization across countries. However, with some success in implementing standards, notably ISO XML, it is likely that we will see greater alignment across the various standardization groups."
— Steven Lenaerts, Head of Product Management, Global Channels, BNP Paribas
— Ivan Todorov, Team Leader, Cash Management Implementation, BNP Paribas
"Treasurers and finance managers need to look at their technology from end-to-end to identify points of friction that could hamper efforts to accelerate and standardize data and transaction flows."
Follow the lead of other companies (including your competitors) during the COVID-19 crisis by accelerating digital initiatives. Consider:
Automating processes.
Digitizing end-to-end workflows.
Centralizing treasury and finance activities to avoid non-standard, manual processes at the business unit level.
— Christian Mnich, Head of Solution Management, Treasury & Working Capital, SAP
“The gateway between corporations and their banks is critical. Over the past five years, we have seen a clear trend for embedding bank connectivity into the TMS or ERP, with a single, scalable channel to support ... complementary data such as bank fee information, electronic bank account management (eBAM), etc. We are also seeing a growing appetite for real-time services, such as market data updates."
Treasury on demand hinges on how well organizations transmit and receive data and transact with their banks. The keys to successful communication include:
Efficient bank and account structures.
Consistent systems and formats across the business for data integration.
A culture of centralization.
Use of API-based bank connectivity to complement existing communication methods.
Communicate better
Expert Tip
Digital signatures.
Expert Tip
Expert Tip
Expert Tip
Read more about these insights in the complete 2020-2021 Journeys to Treasury report.
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THE CONTENT IS BASED ON ARTICLES FROM JOURNEYS TO TREASURY, A UNIQUE COLLABORATION BETWEEN BNP PARIBAS, PRICEWATERHOUSECOOPERS (PWC), SAP, AND THE EUROPEAN ASSOCIATION OF CORPORATE TREASURERS (EACT).
Disclosure
Treasury on Demand
Unlike existing connectivity methods, where banks determine data exchange parameters, application programming interfaces (APIs) allow corporate finance managers to define:
What data they want to exchange with their banks and commercial partners.
How often they want to exchange data.
What happens next with shared data.
Click to toggle between Treasury Centralization and Treasury on Demand
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Treasury On Demand
Treasury Centralization
Leverage API's
Leverage API's
Prioritize digital initiatives
Communicate better
— Steven Lenaerts, Head of Product Management, Global Channels, BNP Paribas
“Although the implementation of APIs is far quicker and simpler than, for example, host-to-host connectivity, there are still some issues to overcome, particularly for those operating cross-border, due to the lack of standardization across countries. However, with some success in implementing standards, notably ISO XML, it is likely that we will see greater alignment across the various standardization groups."
Two Opportunities to Transform Treasury Amid COVID-19
Highlights from the 2020-2021 Journeys to Treasury Report
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